Bluntly Media: Valuation of private company Case Study Solution
Introduction:
Formed in 1990 the media company Bluntly Media revolves around providing direct and printed marketing solutions. It has always been finding ways to expand itself first through increasing its customer base, then through improving the quality of its product and focusing on diversity. The customer base of the media company includes, bankers, retailers, fashion designers and editors, to name a few. With the passage of time the focus shifted to improving the quality if the product along with diversifying the quantity as digital media was also added to its company.
Bluntly Media, operated in a stable trading environment prior to the global financial crisis of 2008, however after thecrises, the company saw a severe change in its fortune with dramatic fall in revenues. The advantage that the media company gained was that all the companies operating in this industry suffered from fall inrevenues on back of continuously falling marketing expenditure incurred by the customers. During the times of economic downturns, the aim of the companies is to maintain their respective profit margins by implementing cost cutting strategies to reduce the expenses incurred by conducting unnecessary business activities which included marketing expenditure. Due to this the marketing industry as a whole suffered from the reduction in revenues and profits.
Apart from the global economic recession, there were additional events which lead to the reduction in the marketing budgets of companies. This difficult trading conditions also forced many advertising agencies to operate in online social marketing sector as well; it can be said that social media marketing is critical for the survival of the companies in modern business environment. For this purpose Bluntly Media has also acquired a company specializing in the social media marketing sector. For this expertise of Bluntly Media has been a target for acquisition for many companies.
External Analysis (PESTEL):
Political:
On the back of global financial crisis the U.S government have emphasised the need to cut back un neccessery costs. This have effected the businesses adversely particulary the ones operating in advertisment industry. Both Bluntly Media and Paterson Publishing Company have faced the brunt of this downturn. The poltical environment in the country does not support these types of companies resulting in lower generation of funds for these companies.
With extreme measures in place to manage the liquidity of the various industries the industry as whole is under lot of external pressure to cut back their non-operational costs. This means that the possibility of acquisitions and mergers in the currently hostile political environment is not feasible. The highly uncertain political situation is playing havoc this industry.
Economical:
Of various segments operating in the advertisement industry direct marketing was the only segment left untouched by the economic downturn of 2008. This was the only part that continued to generate revenue for the company even expanding in later years but the overall impact was such that it was difficult for the company to rebound from the loss of business.
Global Financial Crisis of 2008 had created extreme uncertainties among business harming their going concern assumption. The possibility of mergers seemed low during this period with the main concentration of the government and the business being salvaging the debt amounts from hubris of debt bubble burst.
Social:
Social element is one the essential part in the Media and advertisement industry. The firms in this industry are heavily dependent upon other business for work and revenues. This means that creation of a huge social network is important for these businesses. The social elements enables them to maintain and create business for their firms.
Furthermore the social elements also states the need to use the digital media and create ads within the boundary of cultural values and beliefs of the society in which they are operating.
Technological:
The nature of industry in which both Bluntly Media and its potential acquirer Paterson Publishing are operating in is highly sensitive to slightest changes on technological front. The companies need to remain on alert to ensure continuous incorporation of technological changes into their operations.
In these uncertain times it is essential for the company to keep an up to date technology to ensure that they remain in contention for business. They have to incorporate technological changes to provide better services to their clients so as not to lose business.
Environmental:
Even though this element does not play an important role in decision making process in this industry, the times are changing. There is more focus on creating a healthy and sustainable environment for the masses. This in particular relates to the various companies’ capability to add towards the society through its operations.
This also provides an opportunity to the firm to re-evaluate the elements of its operations that are inversely affecting the environment such as usage of newspapers. They can try to bring all their content on digital technology and ensure provision of clean and acceptable content which does not harm the sentiments of the society as a whole.
Legal:
Being an advertisement firm, Bluntly Media have to follow strict code of conduct to ensure that there is no non-compliance of laws and regulations in relation to production of the content used by them. They have to further ensure that their content is not provocative and does not give rise to ethical issues.
BLUNTLY MEDIA VALUATION OF PRIVATE COMPANY Harvard Case Solution & Analysis
Furthermore the company has access to various organization and in many cases to the sensitive data of the companies, so it is their duty to ensure that the data they have been entrusted with is not misused as this will damage the reputation of the company and result in litigation cases against the company.
Internal Analysis:
Profitability Ratios:
The profitability ratios of the company state that the gross profit and net profit margins of the company have been constant over the period of five years from 2009 to 2013. The gross profit is deviating from 15% to 16% over the past few years, while the net profit which had been within range of 0.8% have also risen up slightly indicating a better cost control. Net income to asset ratio have also seen a similar pattern with constant rate suddenly rising up at last glance. However the main problem is in the net income to shareholder’s equity ratio which shows a very erratic pattern. It is either rising dramatically or falling dramatically, indicating heavy fluctuation in investors’ interest in the industry......................
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